Romania: Industry slows in May
Industrial production growth decelerated from 6.1% YoY in April to 3.6% in May. Still, industry is likely to post a sequential expansion in 2Q18 after a QoQ contraction in 1Q18
Manufacturing led the slowdown after a deceleration from 7.8% in April to 3.6% YoY in May. This reflects leading indicators such as German Ifo, and sluggish confidence. There was a stabilisation in external soft data in May, coupled with a pick-up in Romanian manufacturing morale in June driven by improving order books, including for export, and better production expectations.
Summing-up, the GDP growth prospects for the second quarter look a bit better and could alleviate NBR worries of a more prolonged soft patch. The NBR could hike rates again at its 3 October meeting, provided RON depreciation pressure does not force the central bank to frontload the move for the 6 August meeting.
We expect growth for the whole year to slow from 6.9% YoY in 2017 to 3.5% in 2018. This is likely to lead to more significant budget revision but not at the July review - the government's growth expectations are even more optimistic than the 5.5% assumption used for budget planning (according to the deputy PM, cited by Bloomberg).
This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
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